As has been the case with a number of high-profile special purpose acquisition company (SPAC) mergers, the past three years have been rather dim for most de-SPAC companies. BuzzFeed (NASDAQ:BZFD) is certainly one company that can be included in this group. BZFD stock is now trading around 25 cents per share — a far cry from the company’s $10 SPAC merger price a little more than two years ago.
Of course, a lot has changed since the height of the hype-driven market in late-2021. Online media companies are struggling to garner the kind of attention from readers that many hoped would continue following a return to normal in the economy. In this digital age, there’s certainly been a lot of excitement around companies like BuzzFeed, though valuing such companies has proven to be difficult. The decline of BZFD stock is a great example of how over-exuberance, and perhaps over-bearishness, can lead to massive swings in a company’s valuation.
That said, it’s worth noting that BZFD stock is actually up more than 40% in today’s session. BZFD did hit over 50% up earlier in the afternoon. Let’s dive into what to make of today’s rally and where this stock could be headed from here.
Why Is BZFD Stock Surging Today?
Of course, context is everything in assessing certain price movements. And as mentioned, BZFD stock is still down roughly 97% from its pre-SPAC IPO price. So, investors are going to require many, many more 40% plus up days to make new highs, with most early investors in this name unlikely to make their money back.
But fresh money investors who have bet on BuzzFeed as a deep-value stock with a breakup value larger than its current market capitalization are getting rewarded. That’s because today’s news appears to be tied to reports that BuzzFeed is in talks to sell its operations in the U.K. and Ireland. British media group The Independent is reportedly considering taking over BuzzFeed’s operations there. However, the amount expected to be paid is unknown at this time.
Today’s surge in BZFD stock seems to suggest that, at this point, the digital media company is trading like an option on its survival. If investors can reap either takeover value from the company selling itself off entirely or there’s a piecemeal gutting of operations, perhaps there’s something to this recent move. That said, I think most investors ought to remain cautious with this name, given the levels at which it’s currently trading and the market realities facing this company right now.
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On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
